## Salary Income Deemed to Accrue / Arise in India

### Section 9(1)(ii): Salary Earned in India

Salary payable for services rendered in India is deemed to accrue or arise in India — whether the payer is Indian or foreign, and whether payment is made in India or outside.

#### Inclusion of Rest Period / Leave Period

Salary for rest period or leave period that precedes or succeeds a period of service in India — and which forms part of the service contract of employment — is also deemed to accrue or arise in India.

##### Illustration

```

April 2025 → July 2025 | Sept 2025 (Rest Period) | Jan 2026 (Leave Period before 31 March 2026)

Service in India Rest period Leave period

```

Salary for the rest period and leave period is also taxable in India.

### Section 9(1)(iii): Salary Paid by Government of India to Indian Citizen for Services Rendered Outside India

Salary paid by Government of India to an Indian citizen for services rendered outside India → Deemed to accrue/arise in India → Taxable.
Allowances and perquisites paid outside India by Government to such Indian citizen → EXEMPT under Section 10(7).

Component	Taxable in India?
Salary	YES (Sec 9(1)(iii))
Allowances & Perquisites	NO – exempt under Sec 10(7)

Worked example

### Example 1

Example: Mr. K, an NR, comes to India and works for 3 months (April–June 2025). His salary for those months and for a 1-month leave period in July 2025 (per his contract) is paid in his home country. Taxability in India?

Solution: Salary for services in India + leave period that forms part of contract → both deemed to accrue/arise in India → Taxable in India.

### Example 2

Example: Mr. R, an Indian citizen, is posted as Indian Ambassador in Russia. He receives salary ₹10,00,000 + allowances ₹3,00,000 + perquisites ₹2,00,000.

Solution: Salary ₹10,00,000 → Taxable in India under Sec 9(1)(iii). Allowances + Perquisites ₹5,00,000 → Exempt under Sec 10(7).

⚠️ Common exam mistakes

Treating salary paid outside India for India work as 'received outside India' — what matters is where services are rendered.
Forgetting that rest period/leave period salary is taxable only if it forms part of the service contract.
Taxing allowances and perquisites paid abroad by Government to Indian citizens — they are exempt under Sec 10(7).
Applying Sec 9(1)(iii) to foreign nationals working for Indian Government — it applies only to Indian citizens.

Bare-Act text Section 9(1)(ii) & (iii); Section 10(7) · Income-tax Act, 1961 · click to expand

Section 9(1)(ii): Income which falls under the head 'Salaries', if it is earned in India. Explanation.—For the removal of doubts, it is hereby declared that the income of the nature referred to in this clause payable for— (a) service rendered in India; and (b) the rest period or leave period which is preceded and succeeded by services rendered in India and forms part of the service contract of employment, shall be regarded as income earned in India. Section 9(1)(iii): Income chargeable under the head 'Salaries' payable by the Government to a citizen of India for service outside India. Section 10(7): Any allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India for rendering service outside India.

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Salary Income Deemed to Accrue or Arise in India [Sec 9(1)(ii) & (iii)]

Worked example

⚠️ Common exam mistakes